Progressives make progress

This afternoon I attended the Call to Action Forum presented by the Progressive Democratic Caucuses of the 46th Legislative District.

Wow.

The turnout was amazing. Even though Rep. Jim McDermott was a featured speaker, I didn’t really expect more than 100 people. There must have been at least 500. The audience overflowed out of the main auditorium at the Labor Temple, into adjoining rooms where they could watch on closed-circuit TV.

Anybody who thinks progressives had their morale destroyed by the November election, think again. Today I saw the same kind of energy and dedication that I marveled at during last spring’s caucuses. I have been too immersed in my own battles to have the luxury of feeling confident about our nation’s future. Today I felt confident.

The audience was rewarded by a surprise visit from Rep. Dennis Kucinich, who followed up McDermott’s talk on the Bush administration’s proposed privatization of Social Security, with his own informative presentation on the subject. Opposing Republican efforts to dismantle our nation’s most important social safety net should be the overwhelming focus of Democrats in Congress. After hearing both McDermott and Kucinich put forth such a concise and powerful message, I have renewed hope that Democrats can block Bush’s destructive legislative agenda.

In his discussion, McDermott pointed the audience towards a column by economist Paul Krugman in the New York Times: “Little Black Lies.” In it, Krugman accuses Bush of shamelessly using the “the race card” when claiming that African-American males get a bad deal from Social Security because their life-expectancy is so much shorter than whites. According to Krugman, this not only exploits “the tragedy of high black mortality for political gain instead of treating it as a problem we should solve,” it is also an out-and-out lie.

Here’s why. First, Mr. Bush’s remarks on African-Americans perpetuate a crude misunderstanding about what life expectancy means. It’s true that the current life expectancy for black males at birth is only 68.8 years – but that doesn’t mean that a black man who has worked all his life can expect to die after collecting only a few years’ worth of Social Security benefits. Blacks’ low life expectancy is largely due to high death rates in childhood and young adulthood. African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years – not that far short of the 16.6-year figure for white men.

Second, the formula determining Social Security benefits is progressive: it provides more benefits, as a percentage of earnings, to low-income workers than to high-income workers. Since African-Americans are paid much less, on average, than whites, this works to their advantage.

Finally, Social Security isn’t just a retirement program; it’s also a disability insurance program. And blacks are much more likely than whites to receive disability benefits.

Put it all together, and the deal African-Americans get from Social Security turns out, according to various calculations, to be either about the same as that for whites or somewhat better. Hispanics, by the way, clearly do better than either.

Of course, this is exactly the kind of fundamental dishonesty we’ve come to expect from the right when they can’t back up their agenda with the truth. And the truth is, the Bush administration will do or say anything in their effort to dismantle the greatest legacy of the New Deal.

The congressional Republicans’ confidential plan was developed with the advice of pollsters, marketing experts and communication consultants, and was provided to The Washington Post by a Republican official. The blueprint urges lawmakers to promote the “personalization” of Social Security, suggesting ownership and control, rather than “privatization,” which “connotes the total corporate takeover of Social Security.”

Yes… when proposing legislation designed to dramatically unravel our nation’s most basic social safety net, it’s not economists the Rovians rely on, but rather the “pollsters, marketing experts and communication consultants.”

“Personalization” my ass.

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Goldy, This is the same kind of fundamental dishonesty we’ve come to expect from the “progressives” when they can’t back up their agenda with the truth. By stating the following you have confirmed that no matter what the specifics of the SS reform proposal, as long as Bush is for it the “Progressives” are against it.

“Opposing Republican efforts to dismantle our nation’s most important social safety net should be the overwhelming focus of Democrats in Congress. After hearing both McDermott and Kucinich put forth such a concise and powerful message, I have renewed hope that Democrats can block Bush’s destructive legislative agenda.”

You guys are such a bunch of knee jerkers it is getting laughable. If you and “your ilk” were truly “progressive” (which implies that you support “progress”) you would at least wait until the details are worked out to decide whether you are for it or against it.

And as far as Krugman’s analysis goes, naturally he leaves out the greatest benefit to poor families: the private accounts would be part of a person’s estate and can be passed along to the next generation. Seems like a no brainer to at least support that part of it, unless you’ve got an alternate agenda.

FDR’s scheme worked great for about 70 years. It probably will work equally well for another dozen or so. But after that you, yes, YOU GOLDY, currently in his 30’s, are going to have a huge problem supporting ME while trying to save for your own future and that of your daughter.

When FDR started this there were 42 workers for EVERY retiree; now there are 3.

Do the math.

Also, “All the extra Social Security taxes we’ve paid over the years haven’t actually been saved in the trust fund; they have been spent by Congress. So beginning in 2018 the government will have to pay back the $2.3 trillion it has borrowed. It starts small: an $11 billion payment in 2018, but grows quickly each year to $124 billion by 2041, when the trust fund will be fully repaid.

That $2.3 trillion will have to come out of higher taxes or lower government spending, for as President Clinton said acknowledged in his 2000 budget, the trust fund does “not consist of real economic assets that can be drawn down in the future to fund benefits. . . . They are claims on the Treasury that . . will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.”

The third problem is that after all of the $2.3 trillion has been paid back in 2041, there will be so many retirees and so few workers that Social Security taxes coming in will only be enough to pay about 76% of promised benefits.”

While I’m sure one of the reactionary’s here at the orgy will have a snide comment or 2 about the politics of the author of this article, smarmy snickering will NOT change the facts.

Zip… read my words… Bush wants to “DISMANTLE” Social Security, not reform it. SS is not an “investment” program… it is old age, disability, and survivor INSURANCE. If he wants to talk about real reforms, I’m willing to listen. But privatization is nothing but an idealogical attack.

ProudAss… oh… so now you are saying that we can’t afford Social Security because Bush can’t balance a budget? According to the CBO, the Social Security surplus won’t be exhausted until 2052… and even then, if no changes are made, it will be able to payout 75% of benefits. The Bush reforms will actually knock 25 years off the surplus.

I’ve been amazed there has been virtually no discussion of a fairly easy means to increase SS cash inflow- abolish the cap on SS income. Collection now stops at less than $90K earnings per year. What would the financial picture look like if this cap were eliminated? Pretty small hit on the well to do, what’s the benefit to the system? I myself see an increase in take home late in the year when I pass the cap. I’m willin’ Of course that goes against this administration’s tilt to the wealthy.

Good article, Proud Ass, it reminded me of another nugget that really burns my craw: The 3.5 million federal govt. employees that are allowed to “opt out” of social security and have private accounts that are essentially the same as Bush’s proposal. Not to mention all the hypocrites in Congress that bellow about Bush’s plan (see McDermott and Kucinich) but do not depend on social security themselves.

What Krugman fails to acknowledge is that the social security taxes withheld from paychecks are only half of what is paid. The other half comes from the employer. For most low and middle income workers (thanks to recent tax reform) this combined amount is the biggest bite from their pay. And it is a total rip off: it does not return percentage wise anything close to what it would if it were invested, and it can not be passed along to your kids if you die early. Opposing reform of this scam is just another in a long line of partisan strategies, and ignores the reality of the present system. These “progressives” are showing their true colors (again) on this one.

Goldy #3: Go ahead and claim that Bush wants to “dismantle” it. Of course, whatever bills are proposed will not dismantle it so your claim is just partisan Bush-bashing and does not have anything to do with whatever specific proposal comes out. Even if you are correct, it doesn’t matter what Bush wants: the bills that Congress will debate are potentially going to be intended to improve it, not dismantle it.

Progressives are always giving Republicans grief about being heartless, this is an issue where partisanship can really hurt the next generation. You should at least wait until the details are worked out to decide whether you are for it or against it.

Unsatisfied with the efforts to set aside Gregoire’s election, below is the latest effort to gather signatures for the recall of Sam Reed (who’s next?): – – – a) I just got the below well-written e-mail from the ringleader of the Reed recall and am copying it for you all:

NOTE: This petition allows you to join the effort. We have not yet received the court’s approval to proceed, hence — this petition allows you to register your support and is not likely to carry the weight of law as required by the applicable Revised Code of Washington. Nevertheless, we are doing our best to demonstrate the awe of the Internet as a powerful tool to bring people who feel the same way “together” and voice their discontent over such a flawed election which should never have been certified.

NOTE: This petition allows you to join the effort. We have not yet received the court’s approval to proceed, hence — this petition allows you to register your support and is not likely to carry the weight of law as required by the applicable Revised Code of Washington. Nevertheless, we are doing our best to demonstrate the awe of the Internet as a powerful tool to bring people who feel the same way “together” and voice their discontent over such a flawed election which should never have been certified.

We already have proof it works kiddies… the only stumbling block is politicians who think the American people are too stupid to invest for their own security compared to Chileans, Peruvians, Argentinians and Columbians (as Geraldine Ferraro recently said: “[I]f you don’t have the knowledge [emphasis added] and the wherewithal [emphasis added] to manage your own private funds,” said Ferraro, “well, you know, you’re gonna be out of luck.”) or they purposely want to depress the economy.

“In 1980, the government of Chile decided to take the bull by the horns. A government-run pension system was replaced with a revolutionary innovation: a privately administered, national system of Pension Savings Accounts.

After 15 years of operation, the results speak for themselves. Pensions in the new private system already are 50 to 100 percent higher–depending on whether they are old-age, disability, or survivor pensions–than they were in the pay-as-you-go system. The resources administered by the private pension funds amount to $25 billion, or around 40 percent of GNP as of 1995. By improving the functioning of both the capital and the labor markets, pension privatization has been one of the key reforms that has pushed the growth rate of the economy upwards from the historical 3 percent a year to 6.5 percent on average during the last 12 years. It is also a fact that the Chilean savings rate has increased to 27 percent of GNP and the unemployment rate has decreased to 5.0 percent since the reform was undertaken.

More important, still, pensions have ceased to be a government issue, thus depoliticizing a huge sector of the economy and giving individuals more control over their own lives. The structural flaw has been eliminated and the future of pensions depends on individual behavior and market developments.

The success of the Chilean private pension system has led three other South American countries to follow suit. In recent years, Argentina (1994), Peru (1993), and Colombia (1994) undertook a similar reform. In the four South American countries, around 11 million workers have a personal retirement account.”

Even its patriarch, Franklin Delano Roosevelt, said of social security, “We shall make the most lasting progress if we recognize that Social Security can furnish only a base upon which each one of our citizens may build his individual security through his own individual efforts.”

And the truth is, the Bush administration will do or say anything in their effort to dismantle the greatest legacy of the New Deal. -by Goldy, 1/30/05, 7:44 pm

Twirly, twirly, spin, spin Goldy.

“It isn’t sufficient just to want – you’ve got to ask yourself what you are going to do to get the things you want.” -Franklin D. Roosevelt (who by the way, was born today, January 30, 1882 in Hyde Park, NY. Happy Birthday Mr Roosevelt.

There already is a model for such a reform, the Thrift Savings Plan, or TSP, for federal employees. It allows them to contribute up to $12,000 into a personal account they own and control. Employees can chose from five different funds: government bonds, a fixed-income fund, a common stock fund, international investments and a small-cap stock-investment fund–or a mixture of them. Today, nearly 3.5 million federal employees participate, and the fund’s value is more than $120 billion. No one has lost his shirt, and participants own real assets for their retirement.

zip @ 10: Having one’s marginal tax rate raised 12.6% is a bummer, no doubt. But why do you single out small business owners?

Business expenses — including wages and other employee costs — are not subject to SS withholding. So, raising the $90K cap doesn’t affect the ability of small businesses to hire new people or expand. I guess I don’t see how raising the cap affects small business owners any differently than other high income individuals.

Ass @ 14: I’m not sure I get your point. The TSP is a program in which federal employees may participatein addition to Social Security, right? I mean, at least for those hired after 1983. Doesn’t that make TSP similar to 401ks and other retirement programs offered by private employers?

And my specific point about McDermott and Kucinich still stands. They pay into Social Security.

scottd: They participate in, but don’t depend on, social security. They have “defined benefit” pension funds that overwhelm any money SS provides after they retire. Sounds similar to but more lucrative than the Bush privatization plan.

zip @ 17: Well, in that case, they’re no different than most other middle- and upper-income Americans. They don’t depend on SS because they have additional retirement plans — just like many other people in private industry.

But, you said they “opt out” of Social Security. That’s just not true. They are in it as much as anyone else. They just have additional resources — like many others.

scottd #15: Take the example of a small business owner with a professional work force including a number of key people compensated in the 90,000 range. Any bonus or raise these people receive will cost the business 6.2%. That is a big hit. The probable scenario is that the bonus will be paid but support staff/new hires will be reduced.

The reason I bring up small business is that the small business has far fewer options than a big corp to find a way to absorb or get around this scenario.

Bush’s plan would divert $1 trillion to $2 trillion of revenue that will be needed to pay benefits to private savings accounts. To make that up, either benefits have to be cut, taxes, raised, or an equal sum borrowed. Guess which the Pubbies will opt for?

zip @ 6

Do yourself a favor and use a good debunker (e.g., Snopes.com) to check out the garbage you receive in your e-mail before you embarrass yourself by repeating it on a message board where you’re certain to get caught.

Erik @ 8

We really need to make the SOS a non-partisan office but until that happens, thank God we have a SOS who puts law above party loyalty, instead of a Harris or Blackwell. Their silly recall isn’t going anywhere, but if Repubs try to dump him in ’08 we Democrats should close ranks and support him — you can imagine what kind of person they’ll try to replace him with!

Memo to Sam Reed: If your Republican friends piss on you, we Democrats will gladly take you.

I’m not sure what you mean by “a number of key people”, but we are talking small business, so let’s assume you meant five key people making $90K a year, plus lower paid junior professionals and support staff. So your key people are making $450K/yr plus maybe double that for your other staff — let’s call it a $1.5M payroll. What do you suppose total annual revenues for a company that size must be? $2M? Maybe more if they are doing well.

Let’s give everyone a 10% bonus, so that’s an extra $45K for the key people that is now going to be taxed at 6.2% if the $90K SS cap gets lifted. Total extra expense: $2790 or less than 0.15% of total revenue. That just doesn’t sound like something that’s going to break the company or affect hiring.

scottd #18: I stand corrected about the “opt out”. But since most middle + income earners don’t depend on SS, Goldy’s progressive view is off base with partisan condemnation of Bush’s proposal. If done right, reform would provide a similar supplemental program to middle income and below who presently depend 100 % on SS.

The main disagreement I have with Goldy on this one is his attempt to characterize reform as “dismantling” and to automatically oppose it just because Bush proposed it. An honest analysis would reveal that the poor working people that depend on social security are getting ripped off, despite the findings of Krugman’s one-sided article. Just the ability to leave a private account to one’s heirs would help many poor families.

5. Social Security is the only retirement income protected against being destroyed by inflation. Private pensions, stock portfolios, and savings accounts all are vulnerable to inflation. Expect Bush’s deficits to produce big-time inflation. I realize he walks on water, but even Bush can’t suspend the law of gravity.

zip @22: I don’t know if Bush’s plan will be better or worse for lower- and middle-income workers than current SS (or even SS that reduces benefits to 70% after 2042). I don’t know because Bush refuses to “negotiate against himself” by telling me what his plan is. Comparative analyses I’ve seen based on what he has said so far leave me doubtful, but who knows? We’ll see when details emerge.

You obviously disagree — and that’s fine. Just don’t junk up the discussion with obvious disinformation like the bit about Congress and federal employees.

Bush’s plan would divert $1 trillion to $2 trillion of revenue that will be needed to pay benefits to private savings accounts. To make that up, either benefits have to be cut, taxes, raised, or an equal sum borrowed. Guess which the Pubbies will opt for? -Comment by Don— 1/30/05 @ 11:42 pm

As opposed to what… sticking your head in the sand and repeating the mantra “it’s not a problem, it’s not a problem”?

Well guess what? It IS a problem. And yes, to fix the problem sometimes you have to make hard choices and be WILLING to make hard choices. That’s called being a GROWN-UP. The libs are out there either denying there is a problem or they are decrying any solution that is proffered, yet they have offered absolutly NOTHING in the way of ideas or solutions. Hells bells, maybe they need to change the mascot from a donkey to and ostrich – with his head in the sand all you see is his ass anyway.

Again, referencing the DuPont article:

“So what to do? We could gradually raise Social Security taxes from the current 12.4% to 18%–an increase of almost half. That would be a heavy burden on young working people and a drag on the economy. Or we could gradually reduce benefits by a third, which would be unfair and very unpopular with every senior citizen. They would argue, correctly, that they had cut a deal with the government, and now the government was reneging.”

“There is no free lunch in this plan. Participants and their employers would have to help fund the transition by contributing an extra 2.5% of wages–but the benefits far outweigh the costs. First, existing benefits for already retired and nearly retired men and women would be guaranteed. Second, the NCPA estimates that using historical stock and bond market growth, the $11 trillion of unfunded future Social Security payments would be eliminated. Finally, since the program would be restored to surpluses by 2040, payroll taxes could then be significantly reduced.”

“If private Social Security savings accounts had been made available 40 years ago, the system would be solvent today as opposed to facing an $11 trillion shortfall. The average return for stocks in the past 100 years has been 6.4% a year; split an account 60-40 between stocks and bonds and the average return has been 5.1%, far above Social Security’s 1.8% return.”

don #20: I stand corrected again. Now talk about the gist of my comment:

“What Krugman fails to acknowledge is that the social security taxes withheld from paychecks are only half of what is paid. The other half comes from the employer. For most low and middle income workers (thanks to recent tax reform) this combined amount is the biggest bite from their pay. And it is a total rip off: it does not return percentage wise anything close to what it would if it were invested, and it can not be passed along to your kids if you die early.”

scottd #21: It’s too late in the evening for me to do the math. Payroll tax of 12.6% on wage income over $90k would pay one entry level engineer for a year at my place. 6.4% for half a year. My business does not fit your example, but maybe is not typical. Suffice to say that rather than raising marginal payroll tax rates by 12+ percent, means-testing (or asset-testing based on present value of pension plans) of recipients would be a more productive way to go with the current system. The growth of private retirement savings over the last 15-20 years has made this a more viable option. Maybe a phase-in over a decade or so. As we both seem to agree, high-income earners and many middle earners do not depend entirely on SS in retirement.

AND, as is so often true with the Dems lately, a large part of their base seems to be disagreeing with the stubborn leaders:

Minorities support Bush’s plan, polls find By Donald Lambro THE WASHINGTON TIMES January 31, 2005

“Political pollsters say Democratic leaders risk alienating strategic parts of their party’s base who support President Bush’s plan to let workers invest a portion of their Social Security payroll taxes in stocks or bonds.”

… “But pollsters who closely track how Mr. Bush’s Social Security investment proposal plays with the American people say that his reform cuts across every demographic and political line, appealing especially to many Hispanics, blacks and Asians who make up a large part of the Democrats’ political base of support.”

… “An Annenberg poll in December showed that 54 percent of Hispanics supported the concept of “allowing workers to invest Social Security funds in the stock market.”

… “More than 51 percent of black voters, the Democrats’ most loyal constituency, say they would like to privately invest as much as half of the payroll tax in individual accounts, according to Mr. Zogby.”

… “But to some polling analysts, the Democrats’ opposition to any reform of the venerable New Deal program, which faces financial insolvency, smacks of defending the status quo.“They are locked into being the party of old-fashioned interests,” Mr. Zogby said.”

Whether you believe SS is facing a “crisis” depends on who you listen to. As usual, GOP partisans listen to what they want to hear and tune out everything else.

Whether SS is really facing a “crisis” depends on which forecasting model you use to peer 50, 75, or 100 years into the future — a tricky business.

Partisan Republican sources are shrill about Social Security’s future, but nobody else is. Not the Social Security trustees, nor the academic community, nor a long list of respected economists.

The trustees use three models, “low cost,” “intermediate,” and “high cost.” Under the “low cost” model, the SS surplus will keep growing forever. If productivity and immigration grow faster than the trustees assume, as a prominent Northwestern University economist predicts, even the “low cost” model is too pesssimistic and the issue facing future policymakers will be how much to cut SS payroll taxes, not how much to cut benefits.

Even under pessimistic forecasts, there is no near-term crisis. The trust fund will be able to pay promised benefits for at least the next 40 years. If nothing is done, at worst, the system still would pay 75% of promised benefits after 2050. Minor changes now will have big effects 40 or 50 years in the future, so even this result can be avoided with minor tweaking up front.

Yes, there are those who dispute these projections and claim the math doesn’t work and SS will be in dire straits if we don’t apply drastic surgery to it right now. Who are these folks? The ideologues who hate SS in principle, and the Wall Street brokers and money managers who will reap hundreds of billions in fees if Bush’s plan is enacted, that’s who. You’d have to be a Republican to take their word over that of reputable scholars or the SS trustees.

Don 29, There is no trust fund. It consists of IOU’s to be paid out of future tax revenues.

Ok, maybe there is no crisis, maybe there is. Seems to me that even progressives ought to ignore Nancy Pelosi’s rhetoric about this issue and think for themselves. Especially those who have kids now entering the working world. How can you not want to try to improve things for them?

The SS reform proposals (not dismantling, Goldy) seem to be headed towards the following improvements over the present set up:

Even under extremely conservative investment rules, private funds invested by the next generation will return way more than SS retirement benefits.

Private investment of SS retirement will get more people invested in America. How is that a bad thing? Remember Savings Bonds? Similar idea in simpler economic times.

Private SS accounts will be owned and can be passed down to heirs. This will help the families of many working poor.

As far as who supports this reform, you use the typical liberal trick of demonizing Wall Street. You also say “Partisan Republican sources are shrill about Social Security’s future, but nobody else is.” Well I say the working people in their twenties are not shrill, but skeptical. And it’s their future we’re talking about, so try this: take a person in their twenties, sit down with them and their W-2 and discuss it with them using real numbers.

As I understand it the bush changes would allow individuals to divert some of their social security payments into other investments, Is that correct? If so, what would happen in say 8 years and we drop into a second ‘great depression’ with the stock markets crashing to the floor? How many more people would that put on government subsidies? How many suicides would that cause? I have not seen that issue so I do not know if it applies….Where can I read the ‘official’ bush changes?

zip @ 31, instead of doing his own thinking, afflicts us with the standard-issue GOP talking points, none of which is more disingenuous than the shopworn “there is no trust fund. It consists of IOU’s” argument.

Is it possible the U.S. government might default its debt obligations? Nothing is perfectly safe, but nothing on the planet is safer than the U.S. gov’t’s promise to repay principal with interest. This argument is the Mother of All Red Herrings, because if the U.S. gov’t defaults, the entire financial system will collapse and none of your other financial assets will be worth anything either.

So here we are debating whether SS is going broke and Bush proposes to “fix” it by removing another trillion or two from the account. This is the kind of “solution” we need if SS has money coming out of its ears, more than it can efficiently burn or give away, and this money needs to be got rid of before the piggy bank blows apart at the seams. If the program truly is ailing, how much sense does it make to “fix” it by taking money away from it? Stupid, stupid, stupid. If that’s how GOPers “fix” things, I won’t let them near my lawn mower let alone Social Security.

ProudASS (post #2) quotes Pete du Pont on the famously conservative Wall Street Journal editorial page: “All the extra Social Security taxes we’ve paid over the years haven’t actually been saved in the trust fund; they have been spent by Congress. . . . the trust fund does ‘not consist of real economic assets’ . . . .” zip chimes in at post #31, saying “There is no trust fund. It consists of IOU’s to be paid out of future tax revenues.”

This is such a half-truth. Yes, Congress has consistently spent the surplus from Social Security payroll taxes. But Congress didn’t (couldn’t!) just take the money, as if it were lying around for them to spend. They borrowed it.

Digression: Politicians these days — Republicans especially — do seem fond of spending now and putting off payment until later. it reminds me of J. Wellington Wimpy. You remember Wimpy. Popeye’s buddy in the bowler hat: “I will gladly pay you Tuesday for a hamburger today.”

Yes, the borrowed Social Security money has to be repaid, and the government’s ability and willingness to repay its bonds is not in question. U.S. Treasury bonds not “real economic assets”? The bond market would disagree. The only way they aren’t is if the government defaults on its debts, which implies the Nation has undergone an economic meltdown (and in that case a lot of investments will be worthless and a lot of people will need a social safety net).

ProudASS (post #11) cites Chile as the shining example of social security privatization that we should be rushing to emulate. Evidently he did not read the New York Times’ January 27 article, Chile’s Retirees Find Shortfall in Private Plan.

Highlights:

. . . the promise was that such investments, by helping to spur economic growth and generating higher returns, would deliver monthly pension benefits larger than what the traditional system could offer.

But now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised . . . . the government continues to direct billions of dollars to a safety net for those whose contributions were not large enough to ensure even a minimum pension approaching $140 a month. . . .

Even many middle-class workers who contributed regularly are finding that their private accounts – burdened with hidden fees that may have soaked up as much as a third of their original investment – are failing to deliver as much in benefits as they would have received if they had stayed in the old system.

” . . . all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981.”

“it is absolutely impossible to think that a system of this nature is going to resolve the income needs of Chileans when they reach old age.”

Despite initial projections that the system would be self-sustaining by now, spending on pensions makes up more than a quarter of the national budget . . . .

Incidentally, because ProudASS cited the Cato Institute I think it’s fair to reveal that “The main architect of the Chilean system is Jose Pinera [who is now] co-chairman of the Cato Institute’s Project on Social Security Choice . . . . Mr. Pinera declined repeated requests to be interviewed for this article.”

I’m not persuaded that Chile represents the ideal model for Social Security.

Don says, “Bush’s plan would divert $1 trillion to $2 trillion of revenue that will be needed to pay benefits to private savings accounts.”

Don’t forget, that’s just the first decade. The shortfall from taking Social Security payroll taxes out of current benefits goes up sharply in following decades — it makes the financial condition of Social Security worse, not better. As Paul Krugman pointed out in his January 11 column,

Privatization would cost an additional $3 trillion in its second decade, $5 trillion in the decade after that and another $5 trillion in the decade after that. By the time privatization started to save money, if it ever did, the federal government would have run up around $15 trillion in extra debt.

So partial privatization would quickly suck down the Social Security surplus down to nothing, and we’d have to keep borrowing in order to keep the new system going. We’d be spending $15 trillion to save 3. Brilliant.

Look, everyone supports the idea of encouraging people to save for their retirement. As Americans we aren’t saving enough. So we should enact tax policies that encourage saving — but not at the expense of Social Security’s income insurance for the elderly. Yes, encourage everyone to invest money for their old age, but don;t force everyone to make a Hobson’s choice — keep your guaranteed basic retirement income, or forfeit it in order to potentially do better through the risks and rewards of the stock market.

Granted, the average rate of return in the stock market over time (not considering commissions, fees, etc.; perhaps even with them factored in) will beat the rate of return from Treasury bonds (where the Social Security surplus is currently invested). But lots of people won’t be average. Some will be lucky and reap huge returns. Others will be unlucky and lose their personal retirement nest egg. And that’s a big problem with privatizing Social Security. You should never invest what you can’t afford to lose. What will we do when elderly people are left destitute? Who will say, “Tough luck, grandma. You made a choice, and you lost. Don’t come to us for help now.”

No, we need to keep Social Security’s retirement income insurance, and tweak revenues or benefits as necessary now to keep the program viable in the future. That may even mean doing nothing, considering that the Social Security Administration’s future projections are based on very conservative, low-ball numbers. (And really, how accurately can we project finances for 75 years? We can’t even get 5-year forecasts right.) Of course, even moving into deficit won’t “bankrupt” Social Security; deficits haven’t exactly stopped the rest of the government from functioning. There’s no reason to give up on Social Security income support for the elderly. Social Security and personal investments for retirement are not an either-or choice.

As ProudASS so appropriately quoted FDR above:

“We shall make the most lasting progress if we recognize that Social Security can furnish only a base upon which each one of our citizens may build his individual security through his own individual efforts.“

Robert Reich suggested an easy way to stimulate saving while maintaining Social Security and even making it more fair. Increase the payroll tax salary cap by $10,000; then exempt the first $10,000 of income from payroll taxes if the money is put into a (tax-favored?) savings account. There are plenty of of other options for achieving the same goals. But I don’t expect Republicans to enact any of them as long as the party’s right wing — intent on phasing out Social Security — is in control.

Why not just let Social Security invest surplus funds in the stock market? That takes care of the rate of return discrepancy (and itself stimulates stock prices, with billions of dollars entering the market) while spreading out the risk and reducing costs (compared to millions of individually-managed accounts, and their associated broker/mangement fees — by the way, nice observations in post #23, Don). And as a big institutional investor, the SSA can get better information and advice than the average person (and cheaper in time and money than educating every investor-retiree). Why not get the benefits of investing in securities, without the danger of individuals investing badly and going broke?

This would also avoid the need to borrow trillions to finance privatization. The Bush Administration and other supporters of phasing out Social Security in favor of private accounts never seems to mention that the future generations who supposedly benefit from increased private market returns also have to pay back those trillions, plus interest. That makes the pretty financial picture of private accounts look less rosy. Certainly a lot less attractive than having the existing Social Security system invest and earn bigger returns, guaranteeing benefits into the future with no additional taxes or benefit cuts.

zip @ 31, instead of doing his own thinking, afflicts us with the standard-issue GOP talking points, none of which is more disingenuous than the shopworn “there is no trust fund. It consists of IOU’s” argument. -Comment by Don— 1/31/05 @ 3:11 am

ProudASS (post #2) quotes Pete du Pont on the famously conservative Wall Street Journal editorial page: “All the extra Social Security taxes we’ve paid over the years haven’t actually been saved in the trust fund; they have been spent by Congress. . . . the trust fund does ‘not consist of real economic assets’ . . . .” zip chimes in at post #31, saying “There is no trust fund. It consists of IOU’s to be paid out of future tax revenues.” -Comment by David— 1/31/05 @ 3:32 am

Oh my God!! You mean to tell me there are people who still believe in little Al’s cute little lockbox??? Well kiddo, if there ever was a lockbox, that imaginary lock has been picked, the box opened and stuffed with IOU’s!

I’m not persuaded that Chile represents the ideal model for Social Security. -Comment by David— 1/31/05 @ 3:35 am

Of course you’re not- I wouldn’t expect you to as it doesn’t fit with your agenda – one that will do anything to prevent Bush from doing anything that could be considered forward thinking and benefit the American people. It’s really NOT that you don’t want a solvent personal savings acccount, it’s that you don’t want it suggested, passed and implemented by Bush. I just wish you libs would be honest enough to say that.

As I understand it the bush changes would allow individuals to divert some of their social security payments into other investments, Is that correct? If so, what would happen in say 8 years and we drop into a second ‘great depression’ with the stock markets crashing to the floor? How many more people would that put on government subsidies? How many suicides would that cause? I have not seen that issue so I do not know if it applies….Where can I read the ‘official’ bush changes? -Comment by jpgee— 1/31/05 @ 2:58 am

By default, workers would be enrolled in a “life cycle” account, in which investments become more conservative as investors age, if they do not choose one of the other options…

In devising a structure for the private accounts, the Bush administration is modeling its proposal after the Thrift Savings Plan, a tax-deferred retirement investment plan similar to a 401(k). The idea is to minimize risk for people at the outset by offering as few as three to five diversified investment funds.

Bush said in December that his plan would make sure people could not invest “in a frivolous fashion.”

Under the Thrift Savings Plan, federal workers have five investment options, including government and corporate bond funds, a stock fund that tracks the S&P 500, an international fund and other stock funds.

As I understand it the bush changes would allow individuals to divert some of their social security payments into other investments, Is that correct? If so, what would happen in say 8 years and we drop into a second ‘great depression’ with the stock markets crashing to the floor? How many more people would that put on government subsidies? How many suicides would that cause? -Comment by jpgee— 1/31/05 @ 2:58 am

“Although the stock market bounces up and down from day to day, people are not investing today in order to retire next week. They begin paying Social Security premiums when they first get a job and they retire decades later.”

“Stocks are far less risky in the long run than they are in the short run because the ups and downs balance out over a long period of time. It is virtually impossible to find any 40-year period in which the stock market has not paid a higher rate of return on your money than you get from Social Security.”

“There are some mutual funds that simply buy a mixture of the stocks that make up the Dow Jones average (or Standard & Poor’s), so that their clients will have the kind of return on their investments that the stock market as a whole has. They don’t make a killing but they don’t get killed either.”

Zip… read my words… Bush wants to “DISMANTLE” Social Security, not reform it. SS is not an “investment” program… it is old age, disability, and survivor INSURANCE. If he wants to talk about real reforms, I’m willing to listen. But privatization is nothing but an idealogical attack. -Comment by Goldy— 1/30/05 @ 10:11 pm

Nice try.

“Would you sign a contract that enabled the other party to change the terms of that contract at will, while you could neither stop him nor make any changes of your own? Probably not. Yet that is exactly what happens when you pay money into Social Security.”

“No matter what you were promised or at what age you were supposed to get it, the government can always pass a new law that changes all of that. But you still have to pay into the system.”

“A private annuity plan run by an insurance company is legally required to pay you what was promised, when it was promised, and to maintain assets sufficient to redeem its promises.”

“Representative Barbara Lee of Oakland, Calif., is typical of Congressional Democrats in opposing the idea that younger workers should be allowed to invest part of their retirement money in the market, rather than in Social Security. She said: “Social Security is an insurance program, it’s not an investment program. And no way should we want workers to have their benefits put at risk and put them at the whims of the stock market.”

“This is classic liberalism, starting with an utter ignorance or total disregard of economics. An “insurance program” is not something different from “an investment program.” Real insurance companies invest the premiums they receive, precisely in order to have the money available to be able to pay off annuities or insurance claims when they become due.”

“But Representative Lee is half right: Social Security is not an investment program. People like Representative Lee can spend the Social Security money as fast as it gets to Washington, without investing anything to pay off future retirees. An insurance company executive who did that could find himself behind the walls of a federal prison. Barbara Lee, however, is only likely to find herself re-elected, as a reward for handing out goodies with the money that workers think is being put aside for their pensions.”

The race card should only be used when challenging elections that Republicans win. -Comment by Liberal Larry— 1/31/05 @ 10:05 am

The RACE card??? Are you attempting to impugn Thomas Sowell?

“After graduating magna cum laude from Harvard University (1958), he (Thomas Sowell) went on to receive his master’s in economics from Columbia University (1959) and a doctorate in economics from the University of Chicago (1968).

In the early ’60s, Sowell held jobs as an economist with the Department of Labor and AT&T. But his real interest was in teaching and scholarship. In 1965, at Cornell University, he began the first of many professorships. His other teaching assignments include Rutgers University, Amherst University, Brandeis University and the University of California at Los Angeles, where he taught in the early ’70s and also from 1984 to 1989.

In 1990, he won the prestigious Francis Boyer Award, presented by The American Enterprise Institute.

Currently Sowell is a senior fellow at the Hoover Institute in Stanford, Calif.”

if there ever was a lockbox, that imaginary lock has been picked, the box opened and stuffed with IOU’s!

So in your little mind, it would be great for individuals to invest money for retirement (in, say, Treasury bonds), but when the SSA invests money (in the same Treasury bonds) it’s getting scammed with “IOUs”.

Look, if you think your government bonds are worthless (got savings bonds?), I’ll be happy to buy them off you for a fraction of face value.

zip @ 39 – if what you said is not what you meant, that’s not my fault.

ass @ 40 – tell you what, why don’t you go live on a deserted island (a la Survivor or something) and set up your own private account … but keep your cotton pickin’ hands off MY Social Security!!!

ass @ 41 (quoting Thomas Sowell) – my state operates a pension fund for retired teachers, cops, and other public employees. The stock market erased 25% of its assets between 2001 – 2003. Those retired teachers, cops, etc. can’t wait 40 years to receive their pension payments, so please come up with a better suggestion.

Kiddo, you are welcome to keep your pitiful social security, but in return you keep your “cottin pickin'” hands and politicians off MY ABILITY and more importantly, MY CHILDRENS ABILITY to exhibit personal responsibility for themselves as opposed to your desire to have them sucking on the nanny state tit.

I can claim no particular expertise on SS, but I am an expert on my own reaction to the use of bold typeface. Until recently, it rarely appeared in these threads. Now it seems to be becoming the typeface of choice. My reaction now is, if I see considerable bold type in a post, I don’t read it, because it is likely to be just another rant. Bold type may excite the rods and cones in our eyes, but I believe has the opposite effect on our intellect. It’s overuse is the equivalent of a discussion deteriorating into a shouting match.

I would refer everyone to Joel Connelly’s column in today’s (1/30) P-I regarding the Democratic State Central Committee meeting over the weekend:

“If Democratic Party lurches left, it may fare worse…

Unless you are a talk radio “ditto head,” the need for a loyal, effective opposition is recognized as essential to a democracy. The Democratic Party of today could be a long time in opposition.”

* Read the full article at:

Everyone knows that Joel Connelly is not exactly a Bush lover by any standard, so his opinion should mean something. As fars as Social Security, if you don’t like the Bush plan, fine, then propose an alternative. I find it funny that liberal-left columnists were ok with saying that there was a looming problem with SS when President Clinton was in office but now there isn’t even a problem? Well, the D’s are taking a page right out of the R’s play book: When President Clinton proposed health care reform, all the R’s ever said was “Socialized Medicine! Socialized Medicine!” and didn’t propose anything in its place. Now all we hear is “Dismantle Social Security!”…

I would refer everyone to Joel Connelly’s column in today’s (1/30) P-I regarding the Democratic State Central Committee meeting over the weekend -Comment by Jon— 1/31/05 @ 10:48 am

I read it earlier Jon – I needed a double shot of caffeine to jolt me from my state of shock of seeing something that heretical in the PI. I suspect they are just miming what national dems (lots found at RealClearPolitics) are saying in an effort to stop the cancellation hemorraging.

My God, ProudASS, you are cynical to the core. Where do you get off figuring that my “agenda” is “do anything to prevent Bush from doing anything that could be considered forward thinking and benefit the American people.” One thing’s for certain: a psychic you’re not.

I’d be thrilled if the Republicans pass legislation to create more private retirement savings/investment account options. The Republicans are in the driver’s seat; they control what passes and what doesn’t. So I want them to pass good legislation. But proposals to spend trillions to phase out Social Security in exchange for creating private retirement accounts are bad policy. Doesn’t matter whose idea it is.

Don, you suggest that “if they’re worthless, he shouldn’t charge you for them at all, he should give them to you for free.”

Yes, but maybe he thinks there’s a tiny chance they’re redeemable; and to make it a value proposition (it’s the free market!) I’ll offer more than he thinks they’re worth. That way it’s a win-win when he agrees to sell them to me for pennies on the (face value) dollar.

My God, ProudASS, you are cynical to the core. -Comment by David— 1/31/05 @ 10:56 am

I’m not cynical, I’m of the absolute belief that private Americans can do just about anything better than a bloated government bureaucracy can do, with some limited exceptions (police, fire, parks, military, roads – and formerly, the mail). I am annoyed as hell that libs aren’t LISTENING, but instead of doing their infamous knee-jerk dance of assuming.

The way I understand the Bush proposal, NEW WORKERS would have the CHOICE to participate or not. The way I understand the Bush proposal, current or soon to be retirees will maintain what they have NOW. The way I understand the Bush proposal, there will be safeguards in place similar, if not identical, to the federal employees Thrift Savings Plan. The way I understand the Bush proposal, this will be a boon for the economy AND not only will new investors benefit from THAT boon, but so will the current retirees and indeed, all Americans.

ProudASS, you’re a riot. You defend privatization by saying we need to have . . . government control or regulation: “Bush said in December that his plan would make sure people could not invest “in a frivolous fashion.”

If government is going to tell private account holders what they can and can’t invest in, why not just let the Social Security Administration invest surplus funds in the stock market? Let’s get those much-lauded higher returns without spending trillions to create a private account system to replace Social Security insurance.

Ass @ 47 & 48 – If you still don’t get my point about private investment accounts, I can’t help you. As for the alleged “racial slur,” a racial connotation never occurred to me, but it occurred to you — why is that? Few things in this universe are more laughable than Republicans pretending to be champions of minorities.

ProudASS, you are doing a lot more assuming than listening around here. You’re all about the ad hominem attack but I’ve almost never seen you get into a real policy discussion. (And I mean a discussion beyond just reproducing some other commentator’s thoughts on the subject.) Try reading the content of my posts and responding to that.

Ass @ 56 – the way I understand the Bush proposal, it will create trillions of dollars of additional deficits, and i TEND to believe (notice, not “absolutely” believe) deficits are bad for the economy.

Yes, insurance companies invest — AND they distribute risk. Replacing Social Security with a private investment account would allow a person to invest, but would eliminate distribution of risk: that’s not insurance. Let the SSA invest in the stock market and you get investment returns for everyone AND preserve distributed risk. Create investment savings account options on top of Social Security and you let individuals invest without eliminating insurance. I haven’t seen anyone argue that those are bad ideas.

This also illustrates what I’m talking about as far as contributions to substantive discussion. You have a habit of making (literally) bold assertions and quoting arguments that support your assumptions and views, but when anyone brings up a counterargument you only read (and respond to) personal slights and never address the substance of the argument.

You’ve said several times now that there’s no surplus or that it consists only of (worthless?) IOUs. 3 questions: 1) How are government bonds not a real, bookable economic investment? 2) If Treasury bonds are an economic asset, how is the Social Security surplus imaginary? 3) If you assume trillions of new borrowing to create a private accounts system, are you willing to assume the possibility of new borrowing for SSA to invest money in the stock market?

That is the saddest view point I have ever read. If you have no absolute beliefs, how can you know who you are and how can you possibly hold any firm opinion?

It’s no different than you folks claiming that great big ‘gray area’ when confronted with a problem/choice.

Life is black and white. The Law of Identity proves that it is.

And of course you won’t answer with a yes or no to a moral question, because you know that such an answer cripples your argument. So, instead, you throw your hands up in the air and cry, “It’s all gray! There are no absolute beliefs!” knowing that if you don’t have to think about the black and the white of it, the absolutes, you don’t have to think about the fact that what you’re advocating is [b]wrong.[/b]

Gray-area proponents… they crack me up. The only way they can stay justified is to deny reality. You know why? Because the existence of gray presumes the existence of black and white. Without them, gray can’t exist. You know what that means? If black and white are representative of evil and good, respectively, then whatever “gray area” you’re espousing is NECESSARILY evil. To justify it, therefore, you have to deny that fact -deny the existence -of the black.

True or false. One or zero. Right or wrong. Is or isn’t. White or Black. A=A.

Ass @ 49 – We make you pay into SS for the same reason we make you wear a motorcycle helmet — so the rest of us don’t get stuck with your bills in the somewhat likely event you prove to be less agile than you thought you were.

David @ 67 – You’re wasting you time on someone who thinks the only real money is what he can hear clinking in the palm of his hand.

Ass @ 68 – You should be grateful that I outgrew my absolute beliefs, especially the one about my infallibility. The rest of you … be patient with him, he’ll eventually get to the same place, it just takes time and experience. We all started out young and stupid.

What the hell are you talking about? You’re a nut job. -Comment by Aaron— 1/31/05 @ 12:17 pm

Miss your Ritalin dose today?

Absolutes: you either believe something or you don’t. A process of reason is a process of constant choice in answer to the question: True or False? – Right or Wrong? Not maybe, not kinda, sorta, sometimes, could be if. A=A. A thing is itself. It can’t be and not be. It either is or it isn’t. BLACK OR WHITE.

Getting back to Social Security, I would be very opposed to any change which would make the owning of stocks the core of any retirement system. To get an incredible amount of information about historical market performance, and how it relates (or doesn’t relate) to the future, try http://www.finfacts.ie/stockperf.htm, especially the article reached by the button “Analysts Forecasts Low Returns…..” (I’m sorry I can’t do links, but this is a great website for financial markets info).

You know I think it’s funny. the first time I heard about privatizing SS it was from Sen. Henry Jackson. He was a lot of things but he wasn’t right wing. Jimmy Carter said we needed to do something to save SS. I don’t remember him ever saying that privatization was the key…..but he did say we needed to do something. Since then we have changed some of the rules and increased some of the taxes. But, we haven’t really FIXED the system. Dipsticks like McDermott are quick with the nay-saying but not long on ideas. (ya wanna talk about corrupt elections how can King county keep electing this idiot with 80% of the vote. there has got to be more than 20% of the population in that district that has a brain)

To date Bush has said that privatization was an idea…not the only idea to help SS in the future. If you have a better idea (the status quo is not an idea it’s a cop out) float it.

personally I don’t have a better idea…but I have heard some economists that have had some ideas that don’t include personal accounts. Hopefully the bush administration will give them a chance to be heard.

For “progressives” to reject the SS reform out of hand by stating that the evil Bushes want to dismantle Social Security, Wall Street will rob us, etc. is about as close minded as a person can be. The details have not even been worked into proposed legislation yet! And these standard-issue progressive attacks don’t sound like original thoughts either.

The current system is unfair to the people in their twenties and younger. It is an additonal payroll tax that they are paying for their entire working lives with a paltry rate of return. Ask them if they think they’ll ever see any of it. It is not a system that will last if they believe it is a scam, because they will be paying the funds that support all of us boomers over the next few decades. They will not stand for this when they are in their prime earning years. So what is so evil about looking at IMPROVING it now.

The greatest benefit of private accounts is to poor families: the private accounts would be part of a person’s estate and can be passed along to the next generation. Seems like a no brainer to at least support that part of it, unless you’ve got an alternate agenda.

To fund this, benefits should be gradually reduced to those with the means, including the Wall Street sharks, those retired public employees with the juicy pensions, us with our 401k accounts or whatever, and many in between. Gradually return it to the safety net it was intended to be over a few decades and make the privatization affordable for the next generation. That’s not a standard-issue talking point, would be terriby unpopular across the board, but would be more fair to those paying in for the next 40 years.

Oh Zip, let’s just give it up – the common sense and rational arguements are so incredibly wasted on people that have their eyes and ears covered. They aren’t interested, they are unwilling to learn and they will NEVER admit it if they do agree. It’s like arguing with a 2yr old with a head full of Jello: nothing goes in, nothing comes out.

Ass @ 71 – Absolute belief that the Earth is flat doesn’t make it flat. What we’re trying to get across to you is that certitude of belief makes it impossible to spot your mistakes, but I have a feeling this is a waste of time, too.

Of course they believe it’s a scam, after the right wing has spent millions on propaganda to convince them it’s a scam. The last poll I saw on WMDs showed that 2/3rds of the public still thinks Iraq had WMDs. See #77 above, first sentence.

Absolute belief that the Earth is flat doesn’t make it flat. -Comment by Don— 1/31/05 @ 12:46 pm

Contradictions do not exist. Whenever you think you are facing a contradiction, check your premises. You will find that one of them is wrong. In your example, the premises that support that absolute belief contradict reason and science.

Now I’m sure of it. -Comment by Don— 1/31/05 @ 12:50 pm

Careful there, kiddo – that sounded a bit to much like one of those oh-so-horrible-to-be-dreaded absolute beliefs.

1) “The way I understand the Bush proposal, NEW WORKERS would have the CHOICE to participate or not.”

Yes, that’s my understanding too. It’s also my understanding that if new workers choose to opt out of Social Security’s pay-as-you-go system,

2) we’ll have to borrow trillions (or raise taxes) for decades to make up the difference, and

3) those workers will have no retirement income safety net if their investments turn bad.

Do you agree?

4) “The way I understand the Bush proposal, current or soon to be retirees will maintain what they have NOW.”

Yes.

5) “The way I understand the Bush proposal, there will be safeguards in place similar, if not identical, to the federal employees Thrift Savings Plan.”

Yes. I still think it’s funny that you’re advocating government regulation of private investments (‘for our own good’). But it makes sense to try to reduce the risk that someone could lose their retirement nest egg, if there’s no social insurance fallback for individual account holders.

6) “The way I understand the Bush proposal, this will be a boon for the economy AND not only will new investors benefit from THAT boon, but so will the current retirees and indeed, all Americans.”

No, that’s not my understanding. Trillions of new borrowing would not be a boon for the economy. Having more money enter the stock market would be beneficial (to current stockholders, and to money managers especially), but Chile’s experience (post #35) shows that it’s a mixed bag: what’s good for business or the economy as a whole is not necessarily a boon to retirees (or “all Americans”) — and I think that’s what we should be concerned with when we’re talking about Social Security.

Now, let’s add a few more: 7) The way I understand the Bush proposal, partially privatizing Social Security would make the existing system’s finances far worse off, quickly ‘bankrupting’ it rather than ‘saving’ it.

8) It is my understanding that we can maintain the Social Security safety net and encourage personal investments for retirement at the same time; we don’t need to make an either-or choice.

9) It is my understanding that if the Social Security Administration could invest either the system’s surplus (currently in treasury bonds) or additional borrowed funds in the stock market, we would reap the benefits of increased returns for everyone and preserve Social Security’s income assurance safety net.

You know what you don’t see? Either of the parties actually fixing the problem. What is the problem? SST as a spending tool, essentially a line of credit. You want to fix the problem? Actually put that money away in an account. For pete’s sake even if you put it in a “savings” account it would earn millions. Outside of that SS wouldn’t “run” out of money. This is not a partisan issue. Republican and Democrat legislators alike rape this fund. Do you really think any meaningful reform is going to happen when it could possibly mean a decrease in funding for somebodies pet project? Why do think the Democrats are fighting so hard to keep change from happening? Get with it.

ProudASS, I suggest you re-read your philosophy texts. You’re misreading the Law of Identity.

A=A. That’s right.A thing is itself. Yes…pretty much.It can’t be and not be. Not quite. It can’t be X and not X at the same time.It either is or it isn’t. Again, this refers to attributes. My car is red, or it isn’t.BLACK OR WHITE. This just doesn’t follow, the way you’re using it. The Law of Identity does not imply that life consists of absolute polarities with nothing in between. Your reading is false.

Scott thinks that the Social Security Trust fund is being spent away, and that to save it we need to “Actually put that money away in an account. For pete’s sake even if you put it in a “savings” account it would earn millions.”

It is earning millions, Scott — instead of lying around in cash or a bank account somewhere, it’s ‘invested’ in Treasury bonds. Congress can’t just steal the money. It’s earning interest.

2) we’ll have to borrow trillions (or raise taxes) for decades to make up the difference, and 3) those workers will have no retirement income safety net if their investments turn bad. Do you agree?

No I don’t agree. As Dupont pointed out “Participants and their employers would have to help fund the transition by contributing an extra 2.5% of wages–but the benefits far outweigh the costs. First, existing benefits for already retired and nearly retired men and women would be guaranteed. Second, the NCPA estimates that using historical stock and bond market growth, the $11 trillion of unfunded future Social Security payments would be eliminated. Finally, since the program would be restored to surpluses by 2040, payroll taxes could then be significantly reduced.

And as Thomas Sowell pointed out – this is NOT a save this week retire next week program. It is for NEW workers.

We personally had a sudden windfall and made some modest stock market investments back in 1990. The market has been fluctuating in the last 2 years and we lost some of what we made, BUT COMPARED TO WHAT WE INVESTED IN 1990 WE ARE STILL AT ALMOST 15X OUR INITIAL INVESTMENT. And as Thomas Sowell pointed out: ” Stocks are far less risky in the long run than they are in the short run because the ups and downs balance out over a long period of time. It is virtually impossible to find any 40-year period in which the stock market has not paid a higher rate of return on your money than you get from Social Security.”

6) “The way I understand the Bush proposal, this will be a boon for the economy AND not only will new investors benefit from THAT boon, but so will the current retirees and indeed, all Americans.”

When you own a share of a company that is building houses, cars or computers, then your money is creating jobs which then creates demand for more goods and services which creates more jobs and goes on and on creating a larger real wealth.

8) It is my understanding that we can maintain the Social Security safety net and encourage personal investments for retirement at the same time; we don’t need to make an either-or choice.

I suppose that’s true for someone like me that has access to ADDITIONAL money to invest for retirement. But how can you be so cavalier in your condemnation to futher poverty of those that DON’T have disposable income to invest and only have what the government now takes and will hopefully return to them when it’s their turn to retire?

9) It is my understanding that if the Social Security Administration could invest either the system’s surplus (currently in treasury bonds) or additional borrowed funds in the stock market, we would reap the benefits of increased returns for everyone and preserve Social Security’s income assurance safety net.

There is NO surplus. Thomas Sowell again: “According to the unanimous preliminary report of the special commission appointed to look into Social Security, the amount of money coming into the system will be insufficient to pay out what was promised by 2016.”

“When your FICA taxes get to Washington, they are spent — right then and there. What preserves the illusion of a “trust fund” is that the Social Security system is given government bonds in exchange for the money that Congress takes and spends. But, no matter what kind of accounting sleight-of-hand you use, you cannot spend and save the same money.”

“Those bonds in the Social Security “trust fund” represent no tangible assets — not houses, not factories, not cars, not trains. They are promises that can be kept only by taxing future taxpayers.”

All I have to say is do the math. And yes congress can just appropriate the money. The deal is they have to show that they have paid it back sometime in the future. You can’t earn “interest”/”dividends” on money that isn’t there. If you believe in the “Lock Box” oh holy crap.

You overlooked the fact that money diverted from the Social Security Trust Fund for private accounts can’t be used to buy U.S. gov’t debt, so an equivalent amount of debt must be sold in private markets, driving up interest rates and soaking up money that otherwise could be used for business investment.

Before I discuss the Snowball Effect, there’s a housekeeping matter. Bush’s deficit isn’t $465 billion, it only looks that way because of the sneaky accounting rules (called “unified budget”) Congress passed to allow offsetting operating deficits with Social Security surpluses, which makes Congress’s deficit spending look smaller than it is, which is why they did it. The operating deficit really is $456 billion + Social Security surplus ($186 billion) + off budget items (e.g., new $80 billion request for Iraq war). So this year’s deficit is at least $722 billion.

But these figures assume the government can finance its debt at the current interest rate on its debt. In reality, flooding the markets with the gov’t debt previously financed by the SS Trust Fund will drive up interest rates, increasing Uncle Sam’s interest costs. Interest on the debt is a charge against the operating budget, and unless offset by increased tax revenues, the interest rate increases will increase the deficit, which drives interest rates even higher.

Bush’s deficits are gargantuan even in our current historically low interest rate environment. What do you think will happen when interest rates return to normal levels? When the deficits drive them above normal levels? The deficits will balloon, that’s what will happen. Somewhere out there, we don’t know exactly where, it reaches a critical mass (like a plutonium core does) and then … meltdown.

ProudASS, I suggest you re-read your philosophy texts. You’re misreading the Law of Identity.

A=A. That’s right. A thing is itself. Yes…pretty much. It can’t be and not be. Not quite. It can’t be X and not X at the same time. It either is or it isn’t. Again, this refers to attributes. My car is red, or it isn’t. BLACK OR WHITE. This just doesn’t follow, the way you’re using it. The Law of Identity does not imply that life consists of absolute polarities with nothing in between. Your reading is false. -Comment by David— 1/31/05 @ 1:14 pm

“For ‘progressives’ to reject the SS reform out of hand . . . . I’m not rejecting “the” reform; there’s no reform on the table to reject. But from what I’ve heard the Bush administration promoting (and various right-wing organizations supporting), it’s going to be a partial privatization/Social Security phase-out proposal rather than a “reform” proposal. I think that’s a bad idea, and I want to make sure that people know it, and know why, before we get a bad bill introduced. Don’t accuse me of jumping the gun unless you’re also going to complain about everyone who’s advocating a still-unfinalized proposal.

The current system is unfair to the people in their twenties and younger. It is an additonal payroll tax that they are paying for their entire working lives with a paltry rate of return. Social Security is social insurance — basic retirement income assurance. The “return” for a given person may be low, but the risk is zero; and for someone who is poor, and disabled, the “return” may be quite a bit larger. It’s about preventing poverty, not playing the market.

So what is so evil about looking at IMPROVING it now. Improving it now (to make sure it’s there for our kids and grandkids) sounds great. But phasing it out now (and paying trillions to do it) doesn’t sound like such a hot idea.

The greatest benefit of private accounts is to poor families: the private accounts would be part of a person’s estate and can be passed along to the next generation. (So you’re not afraid to make assumptions about what will be in the bill either, it seems.) This isn’t a net benefit to poor families. As I mentioned above, the poor and disabled benefit disproportionately under the current basic income assurance system. With private accounts funded only by payroll taxes, the poor would have much less money in a privatized system. Sure, they could pass it on, but there would be less to pass on. And don’t forget that the money a poor person has received from Social Security can be passed on, and that there are survivor benefits for the family of a worker who dies young.

benefits should be gradually reduced [for] those with [sufficient] means, including the Wall Street sharks, those retired public employees with the juicy pensions, us with our 401k accounts or whatever, and many in between. Gradually return it to the safety net it was intended to be over a few decades . . . . I agree that this would be an excellent solution to keep Social Security viable and fair into the future; too bad it’s pretty much impossible politically.

this is NOT a save this week retire next week program. It is for NEW workers.

Right — but if the new workers take their money out of the old system, someone’s still got to pay the Social Security bill for current retirees. Taxes or borrowing.

8) It is my understanding that we can maintain the Social Security safety net and encourage personal investments for retirement at the same time; we don’t need to make an either-or choice.

how can you be so cavalier in your condemnation to futher poverty of those that DON’T have disposable income to invest and only have what the government now takes and will hopefully return to them when it’s their turn to retire?

The privatization of Social Security would do more to exacerbate poverty among poor workers. Under a privatized system replacing Social Security, poor workers would only be able to contribute a portion of their (by definition) small income and draw on that later in life. Under Social Security now, the system is more generous (in terms of percentage of income) to people at the bottom of the income ladder.

It’s a bit disturbing that you want to treat Social Security’s subsistence-level income support as “disposable income” to be played (and potentially even lost) in the stock market. I’m happy to discuss options for helping people get out of poverty, to get disposable income to invest for themselves; but not at the cost of their Social Security.

9) It is my understanding that if the Social Security Administration could invest either the system’s surplus (currently in treasury bonds) or additional borrowed funds in the stock market, we would reap the benefits of increased returns for everyone and preserve Social Security’s income assurance safety net.

There is NO surplus. Thomas Sowell again: . . . . “Those bonds in the Social Security ‘trust fund’ represent no tangible assets – not houses, not factories, not cars, not trains. They are promises that can be kept only by taxing future taxpayers.”

Well, that’s true of all government bonds. Like I offered above, I’ll be happy to buy yours from you at a steep discount if you think they’re worthless. Anyway, you didn’t address my point; if you’re willing to assume new revenue for privatization, assume (for the moment) new revenue for the Social Security Trust itself to invest in the stock market. Do you see a downside I’ve missed?

Everything that exists has a specific nature. Each entity exists as something in particular and it has characteristics that are a part of what it is. “This leaf is red, solid, dry, rough, and flammable.” “This book is white, and has 312 pages.” “This coin is round, dense, smooth, and has a picture on it.” In all three of these cases we are referring to an entity with a specific identity; the particular type of identity, or the trait discussed, is not important. Their identities include all of their features, not just those mentioned.

Identity is the concept that refers to this aspect of existence; the aspect of existing as something in particular, with specific characteristics.

The Law of Identity has nothing to do with “absolute beliefs” or a black-and-white world with no shades of gray. The axiom that reality is concrete and knowable does not lead to your conclusion that ideas must be absolute and polarized!

I would encourage a look at the link in my #86, re your enthusiasm for stock market returns. Your comments suggest you exercised some wisdom, probably enjoyed some good luck, and prospered, but others may not fare as well.

This topic has generated a healthy discussion on this blog. Hopefully, Bush’s proposal will also generate a healthy discussion nationwide and make people think harder about what Social Security really is.

People need to realize that Social Security is much more like a progressive social welfare program, with significant income redistribution, and is mostly funded out of current revenues.

Too many people think Social Security is more like an actuarial pension system, in which they have “invested” and from which they are entitled to some sort of “return”.

If Social Security really were fully funded and actuarially sound, then Bush’s plan would make a lot of sense. People could at least be allowed to invest the investment portion of their social security contribution in private sector investments. But the redistributionist portion of the social security contribution obviously could not be invested.

Comparing our system with Chile or other countries really isn’t fair. The Chilean system is fully funded and actuarially sound. So there really is money that can be identified to the worker’s contributions and set aside for the worker to have invested as he or she chooses.

Interesting analysis, Richard. But note that Social Security is different from a pension system not only because of its redistributionist aspects, but also because it serves as a guaranteed income floor for the elderly.

The Chilean system is fully funded and actuarially sound.

But the Chilean government still has to step in to support people whose investments have not been successful enough to provide them a poverty-level retirement income.

David, Goldy’s post states: “Opposing Republican efforts to dismantle our nation’s most important social safety net should be the overwhelming focus of Democrats in Congress…I have renewed hope that Democrats can block Bush’s destructive legislative agenda.” The other “progressive” (Rep Pelosi) venting about this uses similar inflammatory language. Call Bush’s plan what you will; Goldy is locked in on “dismantle”. He, you and I are all in the same boat; none of us has seen the legislation but are commenting on it anyway. I will continue to point out the partisan knee jerkiness of Progressives venting about how destructive this dismantling is. Progressives would do us all a favor by stating that the specifics of the proposal MIGHT be worth looking at if it included…. (fill in whatever).

The “return” from Social Security is an important aspect that relates to whether the taxpaying worker believes it is “fair” or even “almost fair”. Benefits are tied to earnings/tax payments over your working life so there is a connection. If young workers discover how lousy the pay-off is for the amount they+their employer are taxed, it might get their attention. Their generation will be making the laws in a decade or so. Calling it a social insurance policy will not fly. We’re talking about 12+ percent on all wages here and it’s most likely going up.

I said “the private accounts would be part of a person’s estate and can be passed along to the next generation.” Because that is by definition how a private account works, (plus Bush says it every chance he gets).

Can you back up your assertion that “With private accounts funded only by payroll taxes, the poor would have much less money in a privatized system. Sure, they could pass it on, but there would be less to pass on.”? I think you missed something here (unless the “funded only by payroll taxes” is some kind of weasel phrase that went by me). I stand by my earlier statements that this generational aspect provides a huge benefit to poor families. It helps the heirs accumulate assets. I am referring here to the remaining balance in somebody’s account if they die before the actuaries think they will; this is different and more significant than what you refer to. I can’t believe that even this one little positive aspect of privatization is not worthy of a few progressives support.

Gradually implementing means/asset testing is something that you and I are ready to agree on, but is a third rail for our representatives. I am convinced that it will be required sooner or later, taxes just can’t be raised enough to avoid it. And the time to start it is now, it will only be tougher once the sixties generation is retired.

It’s hard to say what the Bush plan consists of as has been mentioned here several times..there is no plan yet, just generalities.

Not to mention that Bush is insisting the current system will be bankrupt in short order based on a 1.8% economy growth figure, while outside the other side of his mouth saying a new worker would get thus and so more on their return basing it on a 3.5% economic growth.

There are many ways to tweak the system to sustain it indefinately. My dad has wealth in assets, a full and generous pension, full supplementary medical benefits attached to that pension plan. So he’s collecting all that plus maximum SS and medicare benefits.

He doesn’t need either of the latter. But it’s given him, so he takes it.

Set a means limit. Remove the cap for collection. Up the retirement age by a year.

All small sacrifices which together would ensure that the least able amongst us would not live in abject poverty in their old age, children of folks who die young can sustain some sort of lifestyle, surviving partners will benefit from their spouse’s hard work.

Course that assume the nation has a conscience. If we have truly become a nation of *I’ve got mine, too bad for you*, then it matters little what’s said.

Social Security actually is NOT a guaranteed income floor for the poor amongst the elderly. Some of the elderly receive little or no social security benefits, due to either not having enough qualifying wages, or having very little above the minimum. In these cases, there are Supplemental Security Income (SSI) benefits for the elderly which actually do provide the guaranteed income floor. SSI is funded solely out of general government revenues, as opposed to social security taxes. SSI, of course, is a related concept to Social Security.

zip, as you said,“private accounts would be part of a person’s estate and can be passed along to the next generation.” True enough. And that’s an appealing concept.

But I think private accounts would work out to provide fewer benefits to the poor than our current Social Security system. As we’ve noted before, the proposals we’re discussing are all fluid and conceptual at this point, but here’s my reasoning:

Under the current Social Security system, retiring poor (i.e., low-income) wage-earners receive more benefits (in terms of relative income percentages, not absolute dollar amounts) than the average retiring worker:

Social Security benefits are highly progressive, so that low wage workers get a much higher share of their wages in benefits than do high wage workers. A worker who earned $10,000 a year during their working lifetime can expect to see a benefit that is equal to approximately 75 percent of their average wage. A worker who earned $33,000 a year will get a benefit that is equal to approximately 45 percent of their wage, while a worker who earned $50,000 on average will get a benefit that is equal to 39 percent of their wage.

While poorer workers do not live as long as higher paid workers, the progressive benefit structure largely offsets differences in life expectancy (as do disability and survivors benefits for those who do not live to normal retirement age).

Private investment accounts don’t have that progressive character by default. The concept of private accounts is that everyone pays into their own pot, instead of contributing to a larger pool. That’s fine for most people, who have enough income to provide for a decent retirement income stream, but it might not be sufficient for poorer workers. If the only source of funding for private accounts is the worker’s own payroll taxes, then simple math dictates low-income workers won’t be able to significantly build those assets up. Therefore, private accounts might well give the poor less retirement income than Social Security provides now.

(I acknowledge that a system could conceivably be designed to have progressive, pooled or redistributive aspects in concert with private accounts, but I’m trying to compare the systems here, not synthesize them. Bush will eventually tell us what he’s proposing.)

However, as you’ve pointed out, there is the matter of private accounts being a real, bequeathable asset to benefit the family if the retired worker dies before exhausting the account. I grant that if the worker does die early, his or her family (presumably) will inherit the retirement account, and I agree that’s beneficial in a poor household. But having the money run out early is also a serious possible situation under a privatized system. To me, those balance each other out.

And don’t forget that Social Security also pays survivor benefits to the families of workers who die young; that income stream is an economic asset much as funds in a private account would be. So our current system already deals with that situation. Moving Social Security to private accounts might not leave poor workers better off, all things considered.

G Davis gets down to brass tacks: “Set a means limit. Remove the cap for collection. Up the retirement age by a year.

All small sacrifices which together would ensure that the least able amongst us would not live in abject poverty in their old age, children of folks who die young can sustain some sort of lifestyle, surviving partners will benefit from their spouse’s hard work.”

Yes! Ain’t common sense grand? Note, though, that introducing a means limit or raising the retirement age would have to be done very gradually, so as not to upset the established expectations of seniors near their retirement. (And, for what it’s worth, the retirement age is going up, verrrrrry slowly.)

For those of you who have an account at the New York Times web site, Paul Krugman has a fairly straighforward op ed piece on this subject.

Krugman makes two decent points. First, predictions of Social Security insolvency require pessimistic economic forecasts, while success with a privatized system require more optimistic economic forecasts. If you take the optimistic forecasts used to bolster privitization plans, then Social Security remains solvent.

The second point is a bit more subtle, but has to do with the extent to which one can rely on past performance of the stock market to predict future gains. A common measure of the value of a stock price is the price-to-earnings (P/E) ratio. Historically, the market’s average P/E ratio has been around 14. Today, that average is around 20, with some bellweather stocks (e.g. MSFT) being closer to 30. The market’s latest poster child, AAPL, has a current P/E approaching 60.

So, yes, Thomas Sowell says that it’s difficult fo find any 40-year period where the stock market would have outperformed Social Security (albeit with a substantially higher risk), but suppose one begins with a period where the average P/E ratio reflects today’s pricing levels, like, say, late September, 1929…

I am hearing an increasing tone of pull yourself up and do it yourself, don’t tread on me in any fashion for any reason, not in my back yard, survival of the fittest.

I have nothing against self and hard work. I have nothing against carrying my own weight. There are many for many reasons unable to fulfill that mantra. I also have no problem with helping them.

I think many folks these days forget how close each of us is to some disaster that would render us unable to fend for ourselves. There are social programs that can feed our souls if we allow them to.

Goldy @ 107 I agree…good conversation goes a long way toward compromise. Hollering at each other as we each entrench further into our respective foxholes gets us nowhere.

And back up to your ammendment of the initial post, the admin has taken to instructing SS employees to taunt their *ownership* concept as well…I would hope this use of SS intranet to pimp a viewpoint would be illegal:http://story.news.yahoo.com/ne.....l_security

Thanks for your response. Means testing will require that those of us in our 30’s, 40’s and 50’s accept some reduction of benefit if we are in “above average” financial shape after retirement. Sacrifice something that we don’t really need (and for many were not really counting on getting 100% of) and help the next generation. Tough sell on this one but would do a world of good if it flies.

I read Krugman’s column. For more on this point, see the link on my #72, this thread. Relying on very favorable stock market returns to provide any portion of what would be needed for basic retirement needs (food, clothing, shelter, medicine, a modicum of dignity) would be madness. We’ve been there. We were there at a time when people were more self-reliant than they are now. It didn’t work.

Rick – Kevin Drum has done some further analysis of Krugman’s column and backs up the conclusion:

“[If] you take the economic assumptions behind stock returns of 6.5-7% and plug them into Social Security’s economic model, the system is solvent as far as the eye can see.

The big caveat here, of course, is that the privatizers are almost certainly wrong. Productivity growth is likely to be higher than the trustees’ estimate of 1.6%, but it’s not going to be 3.2% either. Something in the middle is more likely.”

Basically, as Krugman said, if you accept the economic predictions that make a favorable ase for privitazation, then social security’s entire problem (in 2018, 2042 and onward) goes away, without us doing anything. No racking up $10 trillion in debt while we “transition” to the new private costs. No chance of some people retiring in a bear market and losing 50% of their income, etc.

If you accept the economic predictions and add make small adjustments to social security (eliminate the $90,000 wage contribution cap and increas the retirement age 1-3 years), SS’s probably the best funded program in the entire government.

Forgot to add – if you are more pessimistic in your economic predictions (as the social security trustees are in their predictions), then the favorable case for privitization goes away. That is, if economic growth and productivity are lower than the predictions, returns will be far lower than the 6-7% predicted (based on how the stock market has performed in the past).

And that’s not even considering the risks.

I support small changes in social security to manage the fact that people live longer (and more productively) and the redistributive effects of having those making more than $90,000 contribute some more. I also support the ongoing increase in the 401k and IRA contribution limits.

I think the real potential crisis is spiraling consumer debt and people not saving enough in general. Not sure how we can fix that one without changing consumer behavior.

If we are to raise the retirement age, the corporate world has to embrace the idea that elder workers are worth retaining…that is sadly non existant in many cases these days as many feel newer brighter ideas of youth are more valuable in today’s marketplaces.

If we are to invest SS monies in the market rather than in gov bonds, how do we stop the raid that many pension holders are facing today with unscrupulous corporate investing in same?

If we’re so hell bent to get our younger workers outside the SS system, why not take a portion of the projected costs of Bush’s plan and grant a tiding to each child in the nation for regulated investing for retirement? It would cost less, each child would become a part of the ownership society so apparently longed for, and it would cross all social boundries in distribution. I dare say it would be a lot cleaner and more equitable as well.

Re consumer debt…yes, but if consumer behavior changes too much, the economy, which has been shaped and driven by consumer spending, could take a nosedive. We’ve gotten ourselves into a bit of a pickle in this regard. But that’s another story for another time…..

How is SSI “related” to Social Security? They are completely different. SSI is a means-tested federal welfare program. SocSec is an earned benefit paid for by mandatory contributions you pay into the system.

Consumer debt is really a whole different topic. SocSec has to do with senior income. That’s half the picture. The other half is how you spend what you have. I read a post today on another web site from a man whose parents blew their entire estate (almost a million dollars) in casinos and then went deep into deep (two mortgages, maxed-out credit cards, etc.) to continue with their gambling addiction.

THE WELFARE STATEPride and Prejudice“Hell no, we won’t go” is the wrong liberal approach on Social Security reform. BY BOB KERREY Tuesday, February 1, 2005 12:01 a.m. EST

It’s a very good article and I ABSOLUTELY LOVE the first line:

“The late Pat Moynihan used to joke when I asked him why liberals were so reluctant to consider changing Social Security so that it guaranteed wealth as well as income: “It’s because they worry that wealth will turn Democrats into Republicans.”“

Slight correction: the project growth rate for private accounts to be successful in an inflation adjusted 6.5% to 7%–an important enough detail to not let it simply fall to the floor.

Proud @ 123:

First, I notice you haven’t answered my question regaring triangles and absolute truth. I presume that means you grant the notion that there is a certain level of relativity to truth.

Second, the real issue isn’t whether or not Social Security reform is desirable. The real issue is whether or not that reform ought to include some form of private accounts. There is mounting evidence that it should not. Do you agree?

Don @ 122 – I totally understand that the two aren’t related. I’m just pointing out that there are far more pressing threats to consumers, both in government programs (Medicare) and the private sector (spiraling consumer debt and tougher bankruptcty laws). I bring up those as examples to argue that instead of manufacturing a Social Security crisis and spending $10 trillion to “fix” it, we should spend our energy (and money) trying to fix problems that we actually exist.

I simply haven’t been on since late last night, have way too much catching up to do, don’t see the relevence of your post nor care to try and, HATE GEOMETRY.

Not much fun playing with, er, BY yourself, eh?

And NO, I do NOT agree there is “mounting evidence” that a reformed social security should not include private accounts. I most certainly beleive private account are the only path to a solvent retirement and a solvent social security. I think anyone attempting to live on/with what social security provides today is SOL and in 10+ years when there are even fewer workers funding it, the problem will be worse. Luckily, that won’t be me and I certainly don’t want it for my children, which is why THEIR retirement accounts were opened when they were 10(now 25), 8(now 23) and 2(now 16).

ProudAss @ 127 It’s none of my business, but back in your comment 86, you said that in 1990 or thereabout, you received a sudden windfall and made some investments which turned out well. The date of that windfall and the dating of the retirement accounts you established for your children seem to be the same; i.e., about 1990. I’m wondering if the windfall led to the accounts. What you have done for your children is admirable. However, most people don’t receive a sudden windfall. In fact, many people live so hand-to-mouth that the amount of money they can (or will) put into private accounts, given the percentages being talked about, won’t amount to a hill-of-beans when the time comes to retire. Private accounts as an add-on to SS are one thing, but substituting private accounts for part of SS will very likely return old folks to the situation they faced before SS was enacted. Are you suggesting that should that turn out to be the case it’s their own damn fault for being poor?

I’m sorry that you hate geometry, and it’s a shame that you seem unwilling to engage in a thought experiment that could well have an impact on your views about absolutes. And, while I can understand your avoidance of any form of cognative dissonance, your avoidance of such doesn’t lead one to the conclusion that I’m playing by myself, with myself, or, indeed, playing at all. Epistomology is serious business.

As for mounting evidence, I’m not sure what it would take to convince you of this truth. Perhaps you can take up the “no economist left behind” challenge that Krugman echoed: find an economist who is willing to convincingly project the inflation-adjusted 6.5% to 7% growth rate in the stock market required to make private accounts work.

Private accounts as an add-on to SS are one thing, but substituting private accounts for part of SS will very likely return old folks to the situation they faced before SS was enacted

Just FYI – We already have private accounts as an add-on to SS. They’re even voluntary, so no big-bad “socialist” government forcing you to save or invest in something you don’t like.

They’re called IRAs and (if you’re employed at most places in the US) 401ks (or 403bs for non-profits). Or, if you’re self-employed, you can contribute to a SEP-IRA in lieu of a 401k/403b.

And guess what? The limits on how much you can contribute to those tax-sheltered, voluntary, portable private accounts have risen quite a bit in recent years (thank you bipartisan Congress). You can now shelter nearly $17,000 of your own money per year, investing it as you choose. If you’re lucky enough to work for one of those employers that match contributions, you might end up even more each year in tax-sheltered retirement funds.In your IRA you’re free to invest in almost anything and most 401ks at least have a wide variety of fund options.

Few people ever get close to maximizing their tax deferred savings already available under current government programs. And Congress will probably raise IRA/401k contribution limits every 5-10 years.

So, we already have private accounts as an add on to social security :)

Far better to spend our time and money fixing real economic problems (unending massive deficits, Medicare costs spiraling out of control, falling US dollar). Social security, at worst, needs some minor tweaking just like back in 1983. Raise the retirement age, increase the wage cap faster. That’s all. And that’s worst case scenario.

In an attempt to be civil, I won’t tell you what my bottom line opinion of Mr Krugman is – suffice it to say, it would be rude to say in polite company – and, YES, I am giving you all the benefit of the doubt here and assuming you are polite company.

RDC – In the early 90’s my kids were given $5000 each, in no way related to the money we had. We took their money, set up 3 identical mutual fund accounts and walked away. WE HAVE NOT ADDED A PENNY TO THEIR ACCOUNTS SINCE. The reason they are doing so well, and trust me they are doing very well, and the reason our stocks and mutual funds (to which we have also not added a penny, are also doing so well, is not because the stock market is going great guns – we all know IT IS NOT. But the little fact you all forget when you dispute the long term safety of such private investments “willing to convincingly project the inflation-adjusted 6.5% to 7% growth rate in the stock market” is that little thing called DIVIDEND REINVESTMENT. It gives you the ability to use the money the company “rewards you with” (yea, yea, I know it’s the stockholder share of those evil corporate profits) for owning their stock which is then used to buy MORE stock so that next time you get a bigger reward and it keeps growing and growing and growing. AND then there’s that little bonus of STOCK SPLITS. They say stock splits are a zero sum gain: double the stock/halve the price. But, that’s only true for that moment, until the stock begins to rise again. Intel and Microsoft have both split 4x since we bought them. Intel is in the dumper at the moment, but it is STILL WORTH almost 9x what we paid for it. Is it down from that glorious time a couple of summers ago -yep it sure is. But not having SOLD any it really doesn’t matter one way or another.

To continue to burden the younger generation of workers with taxes (a theft of THEIR money) for social security for a payout that is only realizing 1.8% profit (or whatever ridiculously low number it is) is ludicrous and to tell them you (gov’t) doesn’t think they are smart enough to handle/save their own money, is insulting.

They’re called IRAs and (if you’re employed at most places in the US) 401ks (or 403bs for non-profits). Or, if you’re self-employed, you can contribute to a SEP-IRA in lieu of a 401k/403b.

And guess what? The limits on how much you can contribute to those tax-sheltered, voluntary, portable private accounts have risen quite a bit in recent years (thank you bipartisan Congress). You can now shelter nearly $17,000 of your own money per year, investing it as you choose. If you’re lucky enough to work for one of those employers that match contributions, you might end up even more each year in tax-sheltered retirement funds.In your IRA you’re free to invest in almost anything and most 401ks at least have a wide variety of fund options. -Comment by jcricket— 2/1/05 @ 6:13 pm

EXACTLY, exactly, exactly! cricket, as distainful as it would be to both of us, I could kiss you! You just made my point perfectly.

What’s the secret to those IRA’s and private accounts? They grow and grow and grow through interest and dividends over long peiods of time.

The one little niggly fact you omitted though is that there is a large segment of the tax paying population, that can and do indeed pay their FICA taxes (through no choice) BUT HAVE NO DISPOSABLE INCOME WITH WHICH TO PARTICIPATE IN THE GLORIES OF IRA’s and 401K’s.

The question is, why are you all so hell bent on denying them that opportunity?

You know, there’s a saying/lament/whine that goes “The rich get richer”.

Do you know why that is? Why they do? What one thing they have that the non-rich don’t?

OPPORTUNITY and the means to indulge in it.

We’ve all had the opportunity to buy or invest in “something” but couldn’t because we didn’t have the means at that opportune moment and had to sit back and watch someone that did have the means reap the profits from it: “The rich get richer”.

As liberals, purported to be the champions of the downtrodden, you should be the ones in the forefront harangueing to GIVE people the opportunity that private investments would afford them.

In your final full paragraph, you’ve hit on the same concern that many liberals have. Our difference of opinion is what benefit can realistically be expected from the conversion of a portion of a SS account to a private account (you think a great deal, I think very little) and at what cost to the social fabric should I turn out to be right and you wrong, and to the treasury regardless of who turns out to be right or wrong. This is why trying to get a realistic picture of future market performance, and likely SS/PA investor behavior, is so important. You have been both smart and lucky, and in my opinion untypical, so extrapolating from your own experience probably is not relevant to the questions at hand. And I wouldn’t dismiss Krugman lightly. I know he takes very liberal stands on many things, but he is also a pretty good economist. Finally, if you come across a stock you think is a real winner and priced right, let me know. I haven’t done nearly as well in the market as you have.

Um. I hate to inform you, but common dividend paybacks on a low-risk portfolio won’t give you an inflation-adjusted 6.5% to 7% annual rate of return, at least not at the GDP growth rate we’ve experienced over the past 20 years.

So, let people invest in high-risk porfolios? Then we’re no longer talking about an insurance program. Social Security is not an investment program. It’s an insurance program. The end result is nothing more than shifting that risk from the government to private individuals–which would make people’s retirment incomes even more dependant on variations in the growth of GDP.

And, we haven’t even begun to talk about other benefits of Social Security. You can’t simply compare the standard retire at age 65, live your average life-expectancy scenario. There are other scenarios for which people lose quite a bit in terms of benefits under private accounts.

As for people being too “dumb” to manage their own finances, I’ve never advanced such a claim, though it isn’t simply a matter of being “dumb.” It takes quite a bit of training to understand the trade-off between risk and expected rates of return–traning that even quite a few college graduates don’t have.

So, please, rather than regurgitate the same rhetoric that you get at the Heritage Foundation or the Cato Institute, go find an economist who is willing to project the required economic growth rates.

ProudAss Forgot to mention BTW, that the projections I referenced in my #72 and I believe those referenced by Krugman do include dividends in the projected growth rate. As you likely know, currently dividends are pretty paltry from the market as a whole.

Have you ever heard of an annuity? Bond funds of differing terms? Fixed income funds? Diversification of risk?

Slow and steady wins the race kiddo, even in investing – but you have to be ALLOWED to enter the race before you can run it.

And quite frankly, this whole arguement is MOOT – this will happen (listen to/read the news) and it will happen under Bush. The dems can read the polls and they can read their political futures. I only hope that at my age, I can choose to participate and it’s NOT limited to workers younger than 30.

So, please, rather than regurgitate the same rhetoric that you get at the Heritage Foundation or the Cato Institute, go find an economist who is willing to project the required economic growth rates. -Comment by Rick Schaut— 2/1/05 @ 10:21pm

Oh I see.

You “quote” Krugman, but I “reguritate” my sources.

Way to advance the dialogue there Rick.

And, in case you hadn’t noticed the sources I “reguritated” have healthy, impressive, economic biographies: Thomas Sowell: After graduating magna cum laude from Harvard University (1958), he went on to receive his master’s in economics from Columbia University (1959) and a doctorate in economics from the University of Chicago (1968). Walter E Williams: holds a bachelor’s degree in economics from California State University (1965) and a master’s degree (1967) and doctorate (1972) in economics from the University of California at Los Angeles. In 1980, he joined the faculty of George Mason University in Fairfax, Va., and is currently the John M. Olin Distinguished Professor of Economics.

Yea, yea I know, Krugman can go tit for tat, but he’s a smug ass and Sowell and Williams aren’t.

ProudASS, you note that “there is a large segment of the tax paying population, that can and do indeed pay their FICA taxes (through no choice) BUT HAVE NO DISPOSABLE INCOME WITH WHICH TO PARTICIPATE IN THE GLORIES OF IRA’s and 401K’s.”

We’ve already covered this ground.

1) Replacing Social Security with private accounts would leave poor workers worse off. See post #110 (no, really, scroll up and check it out). Don’t assume that people at the bottom of the economic ladder get a raw deal from FICA taxes and Social Security. Don’t assume that just because you might do better with private accounts, everyone else will too. The promises of great rewards from private accounts may turn out to ring hollow for low-income workers.

2) Social Security = social insurance for workers, against poverty in old age. Social Security is a brilliant anti-poverty program; it distributes risk. Private investment accounts don’t protect anyone from poverty. (You might say “securities” are really “insecurities.”) Remember the old mantra: Don’t invest what you can’t afford to lose. You think poor people can afford to lose their Social Security benefits and lose in the stock market? As I said earlier (to you, in fact, in post #95),

“I’m happy to discuss options for helping people get out of poverty, to get disposable income to invest for themselves; but not at the cost of their Social Security.”

Why the heck aren’t conservatives discussing ideas to encourage savings that aren’t tied to phasing out Social Security? Poor workers should not have to forfeit their guaranteed basic retirement income in order to potentially do better through the risks and rewards (“THE GLORIES”, as you put it) of the stock market. If investing in the stock market is conditioned on giving up their financial safety net, will you tell unlucky, penniless elderly folks to shove off and starve on their own? How many destitute grandmas will it take for you to reconsider?

In short: Phasing out Social Security and replacing it with private investment accounts is effectively a pro-poverty proposal.

Why the heck aren’t conservatives discussing ideas to encourage savings that aren’t tied to phasing out Social Security? Poor workers should not have to forfeit their guaranteed basic retirement income in order to potentially do better through the risks and rewards (“THE GLORIES”, as you put it) of the stock market. If investing in the stock market is conditioned on giving up their financial safety net, will you tell unlucky, penniless elderly folks to shove off and starve on their own?

This is a totally disingenous arguement.

1. Conservatives DO discuss “ideas to encourage savings”. However, if your entire paycheck is used for taxes and LIVING, it’s pretty damend hard to do.

2. No one is talking about “phasing out Social Security”. They are talking about a SMALL portion of it and letting the tax payer OWN it completely and invest it for himself. Big difference there.

3. Retirement safety net? You’ve got to be kidding. First, even your own dem Bob Kerrey said just today “On the other hand, there are two problems with Social Security that are serious enough to be called a crisis. The first is that in eight years the income from a 12.4% payroll tax will be insufficient to pay the old age, survivor and disability benefits owed at that time.“ Second, have you ever gotten a projected benefits statement from social security? I have. The most recent for my spouse tells us we’ll be lucky to get $1500/mo. Big flippin’ deal there – gee I can almost cover my mortgage if I chose not to eat, use electricity or flush the toilets on that.

“Slow and steady wins the race kiddo, even in investing – but you have to be ALLOWED to enter the race before you can run it.”

Everyone arguing for private accounts here has failed to address the proposal that we simply allow the Social Security Administration to invest in the stock market (bond market, etc.) instead of requiring it to put every surplus penny into [low-interest, low-risk] Treasury bonds.

It would: 1) improve Social Security’s rate of return 1.1) eliminate any potential need for tax hikes or benefit reductions 1.2) ensure the fiscal viability of Social Security into the far future 1.3) preserve the promise of Social Security for our younger generations2) stimulate stock prices, just like money in private investment accounts3) keep administrative costs low (much lower than the broker/management fees for millions of individually-managed accounts) 3.1) avoid the need for and costs of educating every investor-retiree 3.2) avoid bureaucratic regulations and limits on how private accounts could be invested (forbidding high-risk investments)4) give Social Security’s investments the clout of a major institutional investor (unlike an insignificant individual investor-retiree account) 4.1) put the SSA in a position to get better information and advice than an average private-account holder5) prevent the danger of individuals investing badly and going broke 5.1) preserve Social Security’s income insurance (risk-spreading, safety net, anti-poverty) purpose 5.2) maintain Social Security’s progressive nature in disproportionate assistance to low-income workers6) avoid the need to borrow trillions to finance privatization [but see next post] 6.1) not require rates of return to beat inflation plus interest on borrowing 6.2) not ‘bankrupt’ the existing system 6.3) not endanger the Nation’s economy or spark inflation with vast new destabilizing debts (cf. post #90)

So, this plan is simple and offers the benefits without the drawbacks. Does anyone disagree? If you think privatization is better, explain all this away.

P.S.: Before someone whines (again) that there’s no such thing as a Social Security surplus/trust fund — * First of all, take a breather from repeating the right-wing party line and learn something about Treasury bonds (real assets). [You can start by answering the questions in post #67 (or else take me up on my offer in posts #45, #55 and #95).] * Second, if privatization advocates are willing to have the country borrow $15 trillion over several decades to transition to a private accounts system, then they should also have no trouble with the country borrowing money (probably much less) for the SSA to invest in the markets [although this would reduce advantage #6].

Check out the factcheck link. The moveon zealots are running an ad against Bush over this (maybe they didn’t hear about the 2004 election). The ad:

“shows a series of melancholy, white-haired workers — all of them apparently age 65 or older — at menial jobs. Meanwhile, an announcer says, “thanks to George Bush’s planned Social Security benefit cuts of up to 46 percent to pay for private accounts, it won’t be long before America introduces the working retirement.””

Makes my earlier point. The knee jerk rhetoric from the Bush haters is turning this into a typical “if Bush is for it, we’re against it” issue. Unfortunately a major segment of America believes whatever these self serving partisans, including McDermott and Kucinich, tell them. I don’t know why all the Progressives on this site stay rational when your spokespeople are out there being irrational jerks.

zip: “I don’t know why all the Progressives on this site stay rational when your spokespeople are out there being irrational jerks.”

Both sides have their over-the-top rhetoric and attack dogs (see, e.g., “spitballs”). And unfair attacks mean controversy, and controversy drives news coverage. Arrrgh. What it doesn’t drive is good policymaking.

The whole trust fund discussion of yours, including having SS funds invested directly in the markets rather than allowing the people who earned the funds in the first place invest a portion of it, misses the point that concerns us right wing conspiracy nuts. It is alluded to here:

“The portion of the OASI Trust Fund that is not needed to meet day-to-day expenditures is used to purchase financial securities, generally special public-debt obligations of the U.S. Government. The cash used to make these purchases flows to the General Fund of the Treasury and is used to meet various Federal outlays …Currently, the excess of tax income to the OASI Trust Fund over the fund’s expenditures is borrowed by the general fund, resulting in a substantial net cash flow to the general fund. …this cash flow will reverse sometime in the next 10-20 years. Thereafter, increasingly larger amounts will be needed from trust fund assets to meet benefit payments and other expenditures. Revenue from the General Fund of the Treasury will be drawn upon to provide the necessary cash. The accumulation and subsequent redemption of substantial trust fund assets has important public policy and economic implications that extend well beyond the operation of the OASDI program itself.”

The “important public policy and economic implications” when the cash flow reverses is the problem. The “trust fund” socked away roughly $150 billion of IOU’s in 2004. This $150 billion was spent for guns and butter. When the cash flow reverses, the guns and butter fund will be down this $150 billion, plus the snowballing SS shortfall. Which all agree will be huge. Taxes will not possibly be able to be increased (nor should they) to cover all of this.

Giving the next generation a shot at protecting a portion of what is withheld from their pay and keeping it out of this fiscal mess is a prudent way to protect them from the risks associated with this cash flow problem that the “trust fund” faces. In terms of reducing their long term risk, allowing SS to invest excess in private markets will not work. The funds will be at risk of being taken for other spending priorities of the federal budget unless they are in the individual’s private account.

zip: ” The funds will be at risk of being taken for other spending priorities of the federal budget unless they are in the individual’s private account.”

Okay, I see your point. The problem from your perspective isn’t return on investment, it’s the day (or years) of reckoning when we, and our kids, have to pay off those IOUs with our taxes in the future.

And yes, the government takes advantage of the current trust fund surplus to make the general budget picture look rosier; that won’t last forever, but our politicians aren’t in any rush to face it. There’s no “lockbox,” more’s the pity, so we’ll have to raise the money to pay back the trust fund bonds in the future (along with all the other bonds the government sells to finance the budget deficit each year).

But the totals each year aren’t really that large, compared with our economy and our annual tax revenues. There is no danger that we will default on those debts. (If there were that danger, the value of U.S. treasury notes would plummet, foreign investment in the U.S. would dry up, and a parade of horribles would occur; financial meltdown. Nasty.) We — the taxpayers, the government — will pay them, as we have always paid them.

“Taxes will not possibly be able to be increased (nor should they) to cover all of this.”

I am certain that this is false. The “snowballing SS shortfall” doesn’t get presented for payment all at once! The trust fund is slowly being built up, and then it will slowly be drawn down (bonds redeemed each year, paid with current tax revenues; nothing new there). Yes, future general budgets will need to run surpluses instead of deficits (unless we pay the trust fund by borrowing more!), but the amounts in question are reasonable on a year-by-year basis. The budget won’t be sunk by a $3 trillion charge suddenly coming due.

Now I finally understand why you think treasury bonds are worthless scrip, though! Thank you for giving me a “Eureka!” moment.

“having SS funds invested directly in the markets rather than allowing the people who earned the funds in the first place invest a portion of it” is something you philosophically disagree with.

It would be nice if we didn’t have to pay any taxes, and could invest all that money we’d earned. But our taxes fund the government services we want and need (defense, education, highways, criminal justice, yada yada yada). And FICA taxes pay for Social Security for our seniors, and that’s a program worth hanging onto. As someone else said earlier, TANSTAAFL.

“Giving the next generation a shot at protecting a portion of what is withheld from their pay and keeping it out of this fiscal mess is a prudent way to protect them from the risks associated with this cash flow problem”

This doesn’t seem like a “fiscal mess” (or an impending crisis) to me. We’re talking about 75-year projections; too many assumptions to count. And even with very conservative assumptions about growth, the system is on a solid footing if we apply minor tweaks (hey, take my proposal as one possibility). With more optimistic forecasts, Social Security is sitting fine as is. Funding it is not going to overwhelm us or our kids. Doom is not on the doorstep, or down the street for that matter. We and our children will have Social Security when we retire.

Pulling young workers’ money out of the funding for Social Security (based on fears that it won’t be around for them) is not prudent. Others have discussed the foolishness (and potential danger to the economy) of borrowing trillions of dollars to maintain benefits for current seniors while new workers opt out of the system. You’re worried about paying the trust fund’s treasury bonds as they come due? How is stacking on tons of new debt going to help? And as I’ve asserted before, it’s not prudent to phase out the progressive, risk-spreading social utility of Social Security and move to an ‘every man for himself’ system of retirement security.

Reports of Social Security’s death have been greatly exaggerated. We shouldn’t be looking for ways to kill it and bail out.

Thank you for the rather fine list of qualifications, though Sowell is still an idiot.

But you still haven’t answered the challenge. Find one of them whose willing to project the kind of growth rates required to produce an inflation-adjusted annual rate of return in the stock market ranging between 6.5% and 7%. That’s what it takes before private accounts will provide the same level of benefits that the current plan will provide.

And quite frankly, this whole arguement is MOOT – this will happen (listen to/read the news) and it will happen under Bush. The dems can read the polls and they can read their political futures. I only hope that at my age, I can choose to participate and it’s NOT limited to workers younger than 30. -Comment by HowCanYouBePROUDtobeAnASS— 2/1/05 @ 10:48 pm

Even its patriarch, Franklin Delano Roosevelt, said of social security, “We shall make the most lasting progress if we recognize that Social Security can furnish only a base upon which each one of our citizens may build his individual security through his own individual efforts.” -Comment by HowCanYouBeProudtobeAnASS— 1/30/05 @ 10:52 pm

ProudASS, repeating yourself doesn’t contribute anything to the debate: “this will happen (listen to/read the news) and it will happen under Bush. The dems can read the polls and they can read their political futures.”

Yes, anyone can read the polls. For instance, among the ones you cited: 55% disapprove of the way Bush is handling Social Security; 38% approve (ABC News/Wash.Post, Jan. 12-16). People trust Democrats over Bush to handle Social Security by a margin of 50% to 37% (id.). 56% say Bush does not have a mandate to allow workers to invest some of their Social Security taxes in the stock market (NBC News/WSJ, Jan. 13-17). By 50% to 40%, people say it’s a “bad idea” to allow workers to invest their Social Security contributions in the stock market (id.). And 65% say it’s more important to keep Social Security as a program with a guaranteed monthly benefit based on a person’s earnings during their working life, versus 29% who say it’s more important to let younger workers decide for themselves how some of their own contributions to Social Security are invested, which would cause their future benefits to be higher or lower depending on how well their investments perform (Pew Research Center, Jan. 5-9). (BTW, no, I’m not bothering with the loaded questions from the FOX news poll.) Note that the questions behind those opinion numbers don’t even address the costs of privatization. Support drops even further when you’re talking about proposals with real costs instead of fuzzy concepts.

Congressional Democrats are united behind preserving our current Social Security system (and adjusting it to ensure its long-term viability). They are united in opposing efforts to phase it out and shift to an ‘everyone for himself’ system of private accounts. Congressional Republicans, on the other hand, are split; many have voiced outright opposition to privatization plans. Without political cover from the Democrats, they’re not going to take our payroll taxes out of Social Security. And the AARP is “dead set” against any privatization plan; they’ve already unleashed an advertising campaign against Bush’s expected proposal (USA Today, Jan. 24). The fight to privatize Social Security is a loser.

ProudASS, I see you’re fond of this quote, but try it with a different portion in bold:

Even its patriarch, Franklin Delano Roosevelt, said of social security, “We shall make the most lasting progress if we recognize that Social Security can furnish only a base upon which each one of our citizens may build his individual security through his own individual efforts.”

FDR recognized that Social Security wasn’t intended to supply a person’s entire retirement income; it’s only basic support. But for a large number of retirees, it’s crucial support. Even though we all try to get ahead and build our fortunes and our retirement security while we can — it’s capitalism! — not everyone will be as successful as we hope. Social Security can furnish only a base, but that base is important and we should make certain it’s there for everyone.

No hiding part of the budget deficit with the Social Security surplus, no worrying about having to pay Social Security back later on.

zip, you said that “allowing SS to invest excess in private markets will not work. The funds will be at risk of being taken for other spending priorities of the federal budget unless they are in the individual’s private account.”

But that’s just it — if the SSA invests each year’s surplus in the market (instead of in Treasury bonds), the government won’t be able to touch it! That leaves no risk that surpluses could be used for “other spending priorities.” The Social Security surplus was what, $150 billion last year? FICA tax surpluses (not including interest) are projected to last until 2018 or so. That’s a lot of money (earning good interest) that Congress can’t appropriate.

I imagine conservatives will appreciate this. So zip, ProudASS, et al. — what’s your take on this approach?

I heard something remarkable in the President’s State of the Union address this evening. Here is what he said:

You and I share a responsibility. We must pass reforms that solve the financial problems of Social Security once and for all.

Fixing Social Security permanently will require an open, candid review of the options. Some have suggested limiting benefits for wealthy retirees. Former Congressman Tim Penny has raised the possibility of indexing benefits to prices rather than wages. During the 1990s, my predecessor, President Clinton, spoke of increasing the retirement age. Former Senator John Breaux suggested discouraging early collection of Social Security benefits. The late Senator Daniel Patrick Moynihan recommended changing the way benefits are calculated.

All these ideas are on the table. I know that none of these reforms would be easy. But we have to move ahead with courage and honesty, because our children’s retirement security is more important than partisan politics. (Applause.)

I will work with members of Congress to find the most effective combination of reforms. I will listen to anyone who has a good idea to offer. (Cheers, applause.) We must, however, be guided by some basic principles. We must make Social Security permanently sound, not leave that task for another day. We must not jeopardize our economic strength by increasing payroll taxes. We must ensure that lower-income Americans get the help they need to have dignity and peace of mind in their retirement. We must guarantee that there is no change for those now retired or nearing retirement. And we must take care that any changes in the system are gradual, so younger workers have years to prepare and plan for their future.

Democrats and Republicans alike can wholeheartedly support this. I’m glad President Bush has opened up the national dialogue on Social Security, and even laid out a few options that have been discussed for ensuring its permanent fiscal health. Making small changes now — instead of large changes later — is the best thing that can happen. This is truly common ground.

And then President Bush said this:

As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers, and the best way to reach that goal is through voluntary personal retirement accounts.

Everyone knew the President would propose letting young workers divert their Social Security (FICA) taxes into private accounts. What’s remarkable is the goal he linked that proposal to. The purpose of private accounts is “to make the system a better deal for younger workers.”Not to fix Social Security, or save it from “bankruptcy” — that will happen separately.

So his private accounts plan is simply offered as “a better deal” than Social Security! And that sets up a simple argument about the merits of the systems, an argument that Social Security’s defenders can and will win.

zip: “David, you ignored the qualifier ‘voluntary’ before personal. Voluntary is always a better deal than involuntary.”

For most things, yes. For taxes, not so much. Diverting 4% of your wages away from FICA taxes and into your own personal account may be a good deal for you — for now, at least — but it’s not good for current Social Security recipients (where’s the money going to come from?) or for the future of Social Security and its income assurance and anti-poverty purposes.

I also prefer “involuntary” for things like breathing, where I want it to happen even if I’m not thinking about it, or asleep.

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